I enjoyed reading the above post and agree with the majority of the information.
One thing that usually comes up (gets debated) when I'm discussing Roth with people I know in the FIRE (Financial Independence Retire Early) community, is their strong preference to contribute 100% of all retirement funds pre-tax to the extent possible. Their logic is that they will be able to convert the majority, if not all, of it at 0% tax rates and that it is effectively a Roth contribution. @Michael Plaks post above describes why this is not necessarily the case, but we'll leave that aside for the moment.
Most FIRE people think it's foolish to voluntarily pay taxes upfront for the 0% tax Roth conversion ability above. These are
(some of) the same people (my buddy is one of them) who think that they will always qualify for subsidized healthcare as long as "their income can be controlled," and that there won't be any asset-based testing or rule changes in the future. My stance on it is that the government surely will change the rules at some point and that if you can contribute Roth or convert to Roth at a "reasonable" tax rate, that it's probably better to do that now. The question is what is "reasonable" - 12% federal, 24% federal, anything below 37%? Very subjective. Very much dependent (at least partially, in my opinion) on future tax rates, which no one really knows but I think many of us would agree tax rates are likely going up.
"Tax diversification" is something else often discussed - having investment assets spread among taxable, tax-deferred, and tax-free (Roth) - to better manage whatever the future holds and give yourself options. This sounds great in theory, but the majority of people with typical retirement plans out there have money in tax-deferred vehicles. One of the things I try to keep a running inventory of is my taxable vs. tax-deferred vs. Roth breakdown in terms of percentage in each bucket relative to the total. I actually need to update this again this year. One thing I've found over the years is that since the employer-matching contributions (for those lucky enough to have one) have a tendency to build up the tax-deferred bucket. Some people commonly misunderstand that just because your contributions are 100% Roth (assuming they are), your employer matching contributions will still be 100% pre-tax no matter what. My employer effectively gives us a 9% match (6% match $1 for $1 on contributions and 3% employer automatic contribution), all of which is 100% pre-tax. So no matter what I contribute (assuming it's at least 6%), 100% of their 9% is going in that pre-tax bucket. Perhaps this is another reason to consider making your own contributions as Roth contributions to further balance out these "buckets."
My particular plan does not offer an in-plan conversion feature mentioned as a possibility in the original post. If it did, I would likely consider doing at least a partial conversion this year as my income did drop fairly substantially. Unfortunately, since I rolled my Traditional IRA into my 401(k) plan years ago (yes, you read that right) to avoid the IRA aggregation rules on backdoor Roth IRA contributions (since my income has been over the threshold historically), my pre-tax money is effectively "trapped" inside my 401(k) plan until I leave my current employer or otherwise meet a distributable event which allows me to do a Roth conversion.
In the meantime, it does make my choice a little simpler because it only affects current/ongoing contributions - pre-tax or Roth. This year, I chose pre-tax. I didn't expect my income to drop so dramatically; I actually expected it to increase substantially. A lot of us didn't expect a lot of things that happened in 2020. If I had to go back and do it all over again, I probably would have chosen Roth.
I have no clue what 2021 entails (who does?), but I plan to change my 2021 contributions to Roth 401(k) going forward. Why? 1.) I believe tax rates are going up. 2.) I want to further try to balance my pre-tax and Roth "buckets" for the future. 3.) I agree with Michael's point above about effectively being able to "contribute more" to a Roth versus pre-tax account and the "edge" this provides. 4.) As much as I'm all about FIRE (or at least the FI part), I do not believe that I can contribute 100% pre-tax and ultimately convert at 0% over time based on my individual situation (my buddy on the other hand who is planning to do this is in a different situation and it's POSSIBLE, but in my opinion not PROBABLE long term).
